August 13, 2014

Silicon Valley Is Ruining "Sharing" for Everybody
The marketing lie behind companies like Airbnb and Lyft

If you’ve used Airbnb or Uber or any other “sharing economy” service lately, you may be surprised to learn that you were not a consumer but a foot-soldier in a movement. And like any self-respecting movement, this one has a set of core principles that must periodically be affirmed and elaborated—in this case, at a slickly-produced conference called “Share” back in May.

So it was that Natalie Foster, the former Obama campaign organizer directing the San Francisco assemblage, enthused that the sharing economy was really one big exercise in community-building. Whenever we crash in a stranger’s guestroom or rent out their car, we aren’t taking advantage of a cheap, convenient service. We’re recreating the virtues of small-town America. “We are rejecting the idea that stuff makes us happier,” Foster said, “that ownership is better than access, that we should all live in isolation.”

The insistence that the sharing economy has tapped into a deep yearning for social interaction is both the most idealistic and least questioned assumption among its boosters. “People are both hungrier for human contact and more tolerant of easy-come-easy-go fluid relationships,” David Brooks wrote in a recent mash note to Airbnb. In a Wired story this spring, John Zimmer, the co-founder of the Uber competitor Lyft, invoked a stint on the Oglala Sioux reservation to summarize his feelings. “Their sense of community, of connection to each other and to their land, made me feel more happy and alive than I’ve ever felt,” he said. “We now have the opportunity to use technology to help us get there.”

That's one way of putting it. Another way to put it: For-profit “sharing” represents by far the fastest-growing source of un- and under-regulated commercial activity in the country. Calling it the modern equivalent of an ancient tribal custom is a rather ingenious rationale for keeping it that way. After all, if you’re a regulator, it’s easy to crack down on the commercial use of improperly zoned and insured property. But what kind of knuckle-dragger would crack down on making friends?

Make no mistake—the big sharing-economy companies are flexing an enormous amount of marketing muscle, from dodgy front groups to dodgy numbers. Peers, the organization that sponsored the Share conference (and which Natalie Foster runs), was co-founded by one of Airbnb’s top marketing executives. When I asked a Peers press aide for evidence that the appetite for community-building is what’s driving demand for these services, she directed me to a poll showing that 72 percent of Americans believe “sharing builds friendships and relationships.” But the poll offered no definition of “sharing”—the only context was a previous question about sharing “tools and other household items”—and it made no mention of any companies being involved. If I said my startup was part of the “loving economy,” there’s a good chance I could find a poll showing that people are pro-love, but it wouldn’t establish anything about my company.

To figure out the real reason people participate in the sharing economy—as opposed to what the industry’s clever marketers say—it's helpful to separate the services that more or less existed before the sharing economy from those whose offerings are relatively novel.

In the first category are ridesharing services like Lyft, Uber, and Sidecar, which allow average car owners to become independent cabbies. Some of these companies have marketed themselves as a way to meet new people—most famously, Lyft, whose passengers are greeted with a fist bump and encouraged to ride in front and chat up their drivers.

But it’s unlikely that this is much of a selling point. If it were, it would be hard to explain why Lyft and Uber—which makes no effort to encourage socializing—have been engaging in a brutal price war, since they would effectively be different products. And, in fact, one Washington-area Lyft driver recently confirmed this for me, having asked a number of customers why they take Lyft and not Uber. “They say they take whichever car is closest,” the driver said. “Lyft is slightly cheaper would be another reason.” (The one exception was a rider visiting from San Francisco, who said the city’s ride-sharing ethos is that “you want to be in a car that has cool people.”)

The same goes for a variety of other sharing-economy services that are simply cheaper or more convenient versions of services we’re accustomed to using. TaskRabbit is an app that connects people who need household chores done with people willing to do them. Under the best of circumstances, the chances of finding a soul-mate in the person who unclogs your toilet seem exceedingly small. In the worst of circumstances, the service can feel downright exploitative. (The tendency of some sharing economy companies to undermine worker protections and bid down the value of labor is the phenomenon’s most alarming feature.) One anonymous TaskRabbit freelancer recently told Business Insider she has “worked 12 and 15 hour days doing really strenuous physical labor and had $80 to show for it.” She once estimated she did 10-15 loads of laundry covered in cat diarrhea.

If this is community, then I think I prefer bowling alone.

The second sharing-economy category consists of companies that offer a familiar service with a twist—say, a more customized product. Take RelayRides, which allows owners to rent out their cars to perfect strangers. The advantage of RelayRides over standard rental-car companies is that it tends to be substantially cheaper, especially during weekends and holidays, and that it offers considerably more variety. The people who prefer to drive a stick, or a Mazda Miata, or a vintage Chevy Malibu with a certain type of interior, typically love RelayRides.

There is also a social dimension. RelayRides’ CEO, Andre Haddad, says renters often enjoy meeting owners, many of whom will recommend restaurants and scenic driving routes. “I’ve had 100 rentals on my cars,” says Haddad. “I’ve become almost like a friend, or friend of a friend, giving people advice.”

But as pleasant as this kind of interaction may sound, RelayRides’ own numbers suggest that renters can basically take it or leave it. At the end of last year, RelayRides launched a new valet service at the San Francisco International Airport. In a departure from its usual approach, the renters are greeted by a RelayRides employee and taken to their car. (This turns out to be much easier for the owners, who no longer have to coordinate with an arriving airplane passenger.) According to Haddad, the company has detected no drop-off in user satisfaction.

The same appears true for Airbnb, which offers a vastly larger and more diverse inventory of rooms than the typical hotel chain—whole residential neighborhoods that would otherwise be off-limits. Airbnb goes to great lengths to play up the relationship-building aspect of its service. The company’s origin story, which Chief Technology Officer Nate Blecharczyk cheerily recounted at the Share conference, involves two of its co-founders renting out a bedroom in their San Francisco apartment during a 2007 conference. “Real friendships were formed,” Blecharczyk said. “Something special was created.”

Airbnb doesn’t release data that would indicate how much its users value the social aspect of the service. But, while there is probably a core group who are genuinely out to bond with their hosts, the company’s own moves suggest its users care much more about the authenticity of their surroundings than befriending hosts. Airbnb recently hired a prominent boutique hotel operator named Chip Conley to improve (and generally standardize) its guests’ experiences. When we spoke in July, Conley told me the key insight from his boutique-hotel days is that people want to feel like they’re really getting to know a city or a neighborhood, not staying in some generic or touristy location. (No surprise that Airbnb’s motto until very recently was “live like a local,” something it delivers on exceptionally well.) He told me that a growing number of users are people mulling a move to a new city and want to try it out first.

There are hospitality companies focused on maximizing guests’ social interactions—the Sydell Group’s upscale hostels, for example. Airbnb just doesn’t appear to be one of them. “The Airbnb model is … isolating in a way. You’re staying in an apartment,” says Sydell CEO Andrew Zobler. “Substantively, you’re much more immersed if you’re staying with us. You’re meeting people.”

This brings us to the most exotic part of the sharing economy—companies that broker experiences it would otherwise be difficult, if not impossible, to have. Consider the meal-sharing service Feastly, which enables amateur chefs to host dinners in their own homes. Adventurous eaters can sample everything from obscure ethnic cooking (a taste of Macao, anyone?) to homemade haute cuisine. They share meals inspired by niche dietary lifestyles, like kosher, macrobiotic, and gluten-free.

For all the concrete benefits of the service—the variety, the authenticity, the thrill of experimentation—founder Noah Karesh is at his most evangelical when rhapsodizing about “connectedness.” “We’re bringing people back to the dining room table,” he says. “There seems to be a sense that more people are feeling disconnected.” And, in fairness, Karesh’s data do suggest that users enjoy the social dimension of their meal, not just the gastronomic. Most people show up in pairs and dine with at least some strangers. Half of all women who use the service show up alone.

But even here, in the most share-y corner of the sharing economy, it’s still unlikely that community and connectedness is the primary motivation. Consider a company called GrubWithUs, which trafficked in a similar group-dinner concept, except that the dinners took place in restaurants. Unbeknownst to its proprietors, GrubWithUs was essentially an experiment in whether people really value the friend-making part of Feastly or just the food. (Or at least the food combined with other aspects of the experience, like the intimacy of a private home.) If it’s the former, GrubWithUs should probably have succeeded. If it’s the latter, the site should have failed, since users don’t need GrubWithUs to patronize a restaurant they can dine in any time.

Alas, although GrubWithUs raised over $6 million from the likes of Ashton Kutcher and the VC firm Andreessen Horowitz, it wasn’t a sustainable business. It turned out that the potential payoff just wasn’t sexy enough to divert people from their daily routines. “It’s so hard to drag someone out. There has to be a compelling reason. Dating is compelling reason,” says co-founder Eddy Lu. Exotic, hard-to-find food served in someone’s private dining room may be another. But a platonic friendship with an urban professional was not. Lu and his team pulled the plug on GrubWithUs late last year and are currently working on their next idea.

In December, the Columbia Journalism Review’s Ryan Chittum suggested an interesting thought experiment: Replace “sharing economy” with “sublet economy,” and see how you feel about it then. “Subletting,” he wrote, is both a more accurate and complicated term: “It raises questions about the rights of neighbors and of owners not to have their building turned into a hotel—not to mention the ability of the government to tax these transactions.”

Exactly so. There are clearly some desirable side effects of an economy in which people own fewer goods and rent more of them—the environmental footprint is probably a bit lighter. (Though Big Share engages in a fair amount of propaganda even on this question.) But what we’re talking about here are fundamentally economic transactions.

The financiers grasp this best.

“Airbnb succeeds for the same reason Uber does,” says David Golden, a venture capitalist whose firm has invested in a handful of sharing economy companies. “There are tangible advantages, they’re palpable.”

Brad Burnham, a partner at Union Square Ventures in New York, was one of the few panelists at the recent Share conference to dissent from the airy-fairy rhetoric there. “What we’re talking about is the natural tendency of capitalism to consistently find a more efficient way of delivering something,” he says. “It’s information technology lowering transaction costs and revealing assets that can be utilized.” If only the capitalists who run the companies, as opposed to the ones who finance them, were as clear-headed.